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Congress not just NCUA must act on MBLs says CUNA

WASHINGTON (9/19/12)--While credit unions certainly appreciate any actions the National Credit Union Administration (NCUA) takes to reduce their regulatory burden and allow them to better serve their members, the Credit Union National Association (CUNA) is still urging the U.S. Congress to act to help credit unions meet rising business loan demands and to help our economy more quickly recover, CUNA President/CEO Bill Cheney said.

Cheney's remarks followed the NCUA's release of a legal opinion letter that expanded the definition of "fleet" of vehicles, as used in its member business lending (MBL) rule, to mean five or more vehicles. The Sept. 13 NCUA opinion said the agency's former use of two vehicles to define fleet was "overly restrictive."

The NCUA said the revision better reflects "marketplace realities" and provides regulatory relief to credit unions, enabling them to more effectively serve the business needs of their members.

This effort to lighten the load on credit unions is commendable, Cheney said--and CUNA appreciates it. However, the CUNA leader acknowledged there are limits to what the NCUA can do. "It is hard to foresee an action that the agency could take which ultimately would have the impact that passage of member business lending legislation would have for small business and for credit unions. Passage of this vital legislation remains our top priority," he added.

This effort to lighten the load on credit unions is commendable, but there are limits to what the NCUA can do, Cheney said. "It is hard to foresee an action that the agency could take which ultimately would have the impact that passage of member business lending legislation would have for small business and for credit unions. Passage of this vital legislation remains our top priority," he added.

Bills that would increase the MBL cap to 27.5% of assets, from 12.25%, have been introduced in the House and Senate. Members of both parties support the MBL cap increase bills, and H.R. 1418 has 140 cosponsors. S. 2231 has 21 cosponsors, and Senate leadership remains committed to a floor vote on the MBL legislation. Udall and Royce are sponsors of the bills in their respective chambers.

CUNA has estimated that an MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

The NCUA in a release said the "fleet" definition revision gives credit unions greater flexibility in making lending decisions. A credit union making a loan to a member who owns a business with fewer than five vehicles would qualify for a loan-to-value exception under current regulations, according to the NCUA.

The agency emphasized that its legal opinion is "consistent with the way fleet vehicles are treated by the IRS and auto industry standards."

In reviewing how best to define "fleet," the NCUA said it evaluated case law, how other government agencies use the term, and auto industry standards. NCUA Associate General Counsel Frank Kressman, who penned the opinion, said the agency was "particularly persuaded" by Internal Revenue Service (IRS) publications on the topic and treatment of fleets by auto industry fleet programs.

"Accordingly, we amend the definition of 'fleet' as follows: A fleet is five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire.

"The revised definition also addresses our safety and soundness concerns about collateral devaluation. In this definition, we intend to capture only those vehicles that depreciate at a faster rate than personal vehicles not used for a commercial purpose," Kressman wrote.

However, the opinion letter added, the NCUA continues to expect credit unions to properly underwrite MBLs, taking into account all risks posed by business lending.

The opinion was requested by John Hirabayashi, president and CEO, Community First CU of Florida, who is on CUNA's Examination and Supervision Subcommittee.